FRC revises UK and Ireland accounting standards
News types: Codes and Standards Announcements
Published: 27 March 2024
The Financial Reporting Council (FRC) has today issued comprehensive improvements to financial reporting standards applicable in the UK and Republic of Ireland which are used by an estimated 3.4 million businesses.
The amendments are designed to enhance the quality of UK financial reporting and help support the access to capital and growth of the businesses applying them.
The changes follow extensive stakeholder engagement and consultation on the proposals with the FRC required to undertake a periodic review of FRS 102 every five years.
The most significant changes apply to leases and revenue recognition to align with recent changes to international financial reporting standards. The changes will provide better information to users of financial statements including current and potential investors and lenders. In response to stakeholder feedback, the FRC has made improvements to the proposals for lease accounting and revised the recognition exemption for leases of low-value assets to clarify that the focus is to ensure that the most significant leases are recognised on balance sheet.
The FRC has also made a number of improvements and clarifications that are designed to make it easier for preparers to apply and understand the standards. These are expected to result in a net benefit to UK businesses and contribute to high-quality, easier to understand financial reports.
Whilst there will be some implementation costs, the FRC has been mindful of the need for changes to be proportionate and to remove any unnecessary reporting burdens. During the extensive stakeholder engagement period many stakeholders, including those representing preparers, generally supported the updates to the accounting model for revenue recognition.
The FRC’s Executive Director of Regulatory Standards, Mark Babington, said:
“The FRC is mindful of the need to introduce proportionate changes to financial reporting standards, which are balanced with the need for high quality reporting and alignment with international standards. Today the FRC has also made a suite of improvements and clarifications to make the requirements easier for preparers to understand and apply consistently, improving the quality and comparability of financial information available.”
Overall, the new amendments, alongside the removal of unnecessary reporting burdens, are expected to provide a net benefit to the UK and support better access to capital by UK corporates necessary to realise growth opportunities.”
The amendments to the standards will in most cases be effective for accounting periods beginning on or after 1 January 2026. During 2024, the FRC intends to publish new editions of the standards and updated staff factsheets with guidance on key aspects of the new requirements.
The FRC will also be hosting a webinar to discuss the new standards at 11am on 15 May 2024.
The accompanying impact assessment sets out the expected benefits and costs of the amendments. For the most part it was not possible to quantify the benefits in a systematic manner, and so the impact assessment does not depict, in monetary terms, the FRC’s expectations of the resulting net benefits.
Read the Periodic Review 2024: Amendments.
Read the Periodic Review 2024: Key Changes three-pager.
Read the Periodic Review 2024: Impact assessment.
Read the Periodic Review 2024: Feedback statement.
Separately, the FRC has issued a minor update to its Staff Factsheet 8 Climate-related matters.
Further information
In September and October 2024, FRC staff appeared at a number of events to promote the Periodic Review 2024 amendments.